How China Keeps Iran's Oil Industry Afloat
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How has the U.S. 'maximum pressure' campaign affected Iran's oil industry?
Iran's oil industry has been under harsh sanctions for nearly a decade, and the U.S. imposes penalties on any countries that buy it. And yet, Iran has found a way to keep selling its oil, primarily through a massive underground network.
The so-called shadow fleet of ships. Tankers designed specifically to evade monitoring and sanctions.
Well, for Iran, this network has become a critical tool to keep its oil revenues flowing.
After the US and Israel attacked Iran, Iran closed the Strait of Hormuz, preventing other Middle Eastern countries from exporting their oil. But Iran has continued allowing this ghost fleet safe passage. How important is this for the Iranian regime and its survival?
I don't think that Iran could have fought this war necessarily without the billions and billions of dollars it's received, equivalent of dollars it's received from these oil sales over the years. So this is a significant chunk of cash for Iran annually, and it's a vital lifeline for the country.
That is, until last week. After peace talks collapsed, Trump announced a naval blockade on Iran's Gulf ports in an attempt to shut down its ghost fleet. Our colleague Rory Jones covers how money flows around the world and how the blockade is impacting this underground network.
Iran and countries like Russia and Venezuela that have been sanctioned, they've used this shadow fleet of tankers to move sanctioned oil around the world.
What is Iran's underground network for selling oil?
What the US blockade has demonstrated is that quite easily you can use force to disrupt that entire operation and the threat of force even, because you don't necessarily even have to intercept ships to do that. You just have to create a sense of fear that the US will.
Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Wednesday, April 22nd. Coming up on the show, the ghost fleet that's funding Iran's war efforts.
During President Trump's first term in office, he pulled out of the nuclear deal the Obama administration had struck with Iran and imposed what he called a maximum pressure campaign in hopes of getting Iran to give up on its nuclear ambitions. Here's then Secretary of State Mike Pompeo. We have an obligation to put maximum pressure on the regime's ability to generate and move money.
And we will do so.
And what it aims to do is reduce Iranian oil exports to zero. So we want to cut that financial lifeline, which makes up a huge chunk of Iran's annual budget.
The U.S. threatened to hit any buyers of Iran's oil with sanctions, effectively drying up the country's customer base.
So you had countries in Europe and in Asia buying, you know, U.S.
How does the shadow fleet of ships operate for Iran's oil exports?
allies buying Iranian oil before that. But... They all then left the room, and only really one significant buyer emerged, and that was China.
Now, China buys 80 to 90% of Iran's oil. One reason is there isn't much competition for it, making it much cheaper. Another reason is because China doesn't exactly agree with the U.S. 's sanctions policy.
China's position on U.S. sanctions is that they don't support them and they think that they're a unilateral move by the U.S. and that's U.S. policy, and that they don't have to enforce U.S. sanctions. For China, it's also geopolitical. China has a far deeper relationship with Iran than just buying its oil. Because Iran has been under U.S. sanctions for a very long time, it's had to create these alternative trade networks with countries that are friendlier towards it. And China is one of them. And so it buys a lot of goods from China. China builds a lot of infrastructure in Iran. So there's a deep trade relationship there. And China saw the opportunity not only to get cheap oil, but to help a friend and at the same time undermine U.S.
interests.
China's official position is that it doesn't import Iranian oil. China's customs authorities haven't reported any crude imports from Iran from 2023 onward. Instead, China seems to be working with Iran to disguise its purchases.
They don't outwardly say we are importing Iranian oil in opposition to US policy. And so what the obfuscation and disguising of the Iranian oil does is it gives China the plausible deniability, the ability to say,
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Chapters
7 chapters
1
How has the U.S. 'maximum pressure' campaign affected Iran's oil industry?
0:05–1:48
2
What is Iran's underground network for selling oil?
1:48–3:37
3
How does the shadow fleet of ships operate for Iran's oil exports?
3:37–5:42
4
Why does China buy the majority of Iran's oil?
5:42–9:04
5
What role do Chinese 'teapot' refineries play in processing Iranian oil?
9:04–12:36
6
How does Iran disguise its oil purchases to evade sanctions?
12:36–14:56
7
What are the challenges faced by Iran's shadow fleet amid U.S. blockades?
14:56–16:41